The gas crisis that started due to the Iran-Israel/America war has put the food sector in trouble. Last week, shares of Sapphire Foods India, Jubilant Foodworks, Westlife Foodworld, Devyani International and Restaurant Brands Asia fell by up to 15 per cent. Although the troubles of these stocks are not new, the current gas crisis has deepened the losses. The share price of Sapphire Foods India, which runs KFC and Pizza Hut outlets, fell 12 percent last week. Devyani International, which is set to merge with Sapphire to create a single Yum franchise in India, fell 4 per cent on Friday. Jubilant FoodWorks, operator of Dominos and Dunkin’, lost nearly 4 percent during the same period, while shares of Westlife Foodworld (McDonald’s franchise) fell 4 percent. Meanwhile, Restaurant Brands Asia (RBA) fell nearly 3 percent week-on-week.
Brokerage company warning
Its impact is already visible on restaurants across the country, because according to media reports, many restaurants are closing rapidly. While these QSR companies have not yet indicated any possible disruption in their operations, brokerage firm JM Financial has warned that a prolonged disruption in LPG availability could pose operational challenges for those QSRs where the cooking process is heavily dependent on gas-based kitchens. JM Financial said that this threat has come to the fore as the ongoing conflict in West Asia has led to disruptions in fuel supplies, forcing restaurants to rethink their operations, cooking methods and menu strategies.
Impact on QSR chain will be less
The brokerage note further said, “For QSR operators such as Westlife FoodWorld, Devyani International, Sapphire Foods India and RBA (Restaurant Brands Asia), the immediate concern is rising kitchen operating expenses and the possibility of store closures in certain regions, which may impact outlet operations and restaurant-level margins for some time. However, ElaraCapital believes the impact of the LPG shortage on QSR chains will be lesser compared to non-QSR based restaurants. The reason is that QSR companies are less dependent on LPG and are more dependent on electric ovens and fryers. In fact, they believe that these companies can benefit from the consumer substitution effect away from LPG dependent food.
Less interest from investors
The only exception remains Restaurant Brands Asia, which operates Burger King. Its shares have given a positive return of 2 percent in a period of one year, which is almost equal to the 3 percent return of Nifty in the same period. In the last 12 months, shares of Sapphire Foods have fallen 47 per cent, Westlife Food is down 36 per cent, while Jubilant and Devyani shares have fallen 27 per cent.
Institutional investors’ interest in QSR stocks has also taken a hit as foreign institutional investors (FIIs) are selling their stakes. In the December quarter, FII stake in Sapphire Foods decreased by 210 basis points as compared to the previous quarter, while in the same quarter, Westlife Food declined by 90 basis points. Foreign stake in Jubilant and Devyani declined by 150 basis points and 80 basis points respectively. The worst situation was for Restaurant Brands Asia, where the share decreased by 380 basis points.
earnings statement
The earnings picture was mixed. Devyani’s December quarter consolidated loss widened to Rs 10 crore even as revenue grew 12 per cent year-on-year (YoY) to Rs 1,453 crore. Westlife Food’s Q3 net profit declined by 86 per cent, although total revenue increased by 3 per cent year-on-year.
Jubilant posted strong figures; Its profit after tax (PAT) increased by 65 percent to Rs 71 crore, while total revenue increased by 13 percent. Talking about RBA, due to 18 percent increase in revenue, its year-on-year loss reduced to Rs 7 crore in the third quarter of FY 2025, which was earlier Rs 19 crore.
What should investors do?
Sudeep Shah, Vice President and Head of Technical and Derivatives Research Desk, SBI Securities, said in a media report that there has been a lot of pressure on QSR shares for the last one year, and the recent weakness is not just due to LPG shortage concerns. He said that technically, most of these stocks were already in decline. The current crisis has further increased this pre-existing weakness, rather than the crisis itself being the cause of this weakness. According to experts, investors should avoid ‘bottom-fishing’ (trying to buy shares at the lowest level in a falling market) for now, and wait for clear signs of improvement in the company’s fundamental and technical condition before considering investing in the QSR sector.